NEW YORK / RankWire.AI / – On Tuesday, October 13, the US dollar pulled back from an 18-month high amid declining oil prices and a reassessment of the rally driven by artificial intelligence. The U.S. Dollar Index, which measures the greenback against a basket of six major currencies, decreased by 0.25% to 102.27. It had hit 102.61 on Monday, marking its highest point since April 2025. Investors also awaited new signals from the Federal Reserve regarding US interest rate prospects.
Oil prices declined 0.86% to $105.75 per barrel on Tuesday, influenced by traders considering the possibility of additional diesel supplies from Russia. Russia indicated it might resume diesel exports beyond the levels outlined by US President Donald Trump in a deal with Moscow. Market participants also expect Trump to avoid escalation in the Middle East before the upcoming midterm elections next month. Last week, Trump stated that the US would not attack Iran before the elections. Additionally, he mentioned a potential energy ceasefire between Russia and Ukraine on Sunday.
John Velis, Americas macro strategist at BNY, explained that the dollar was somewhat weaker due to slightly lower oil prices. He pointed out that earnings reports from major banks were mixed and that bond yields had eased from recent peaks. Some analysts believe growing doubts about the artificial intelligence investment narrative are also putting pressure on the dollar rally. Karl Schamotta, chief market strategist at Corpay in Toronto, commented that the US exceptionalism trade has become overextended. Earlier in October, the dollar had already climbed to a 17-month high against other major currencies.
Euro and yen Make Gains Against the US Dollar
The euro increased by 0.3%, reaching $1.1189 on Tuesday, recovering from a low not seen since May 2025. On Monday, the euro dipped to $1.11525, its weakest point in roughly 17 months. This rebound occurred despite a further rise in gas prices, which remain a key factor influencing eurozone inflation. Concerns about France’s fiscal outlook also persisted. Recently, rising oil prices supported the dollar against the euro and the yen, as both currencies are from economies that rely heavily on imported oil more than the US does.
Meanwhile, the Japanese yen appreciated by 0.15% to 158.38 per dollar. The euro also gained 0.21% against the yen, now trading at 177.32 yen. The Australian dollar stood at $0.6979 following the release of minutes from the Reserve Bank of Australia’s latest policy meeting. The minutes revealed that the board unanimously agreed to raise interest rates for the fourth time this year. This September move increased the official cash rate by 25 basis points to 4.60%. The document suggested that further increases are still on the table.
Inflation Figures and Federal Reserve Outlook Under Scrutiny
Market participants are awaiting the US Consumer Price Index for September, which is scheduled for release on Wednesday. This data will offer additional insights into the potential for Federal Reserve rate hikes. According to CME Group’s FedWatch Tool, traders assign about an 80% probability that the Fed will keep rates steady at its October 27-28 meeting, up from 51% a month earlier. The market continues to price in approximately 75 basis points of additional tightening by late 2027. The Fed implemented a quarter-point rate increase in September. Federal Reserve Governor Christopher Waller stated that inflation expectations remain firmly anchored.
The inflation data for September surpassed expectations on Wednesday, pushing the dollar index to an 18-month high. However, the greenback retreated again on Thursday, October 15, with the index dropping 0.44% to 102.00, while the euro rose to $1.1210. Officials from the Fed, including Vice Chair for Supervision Michelle Bowman and San Francisco Fed President Mary Daly, indicated that the central bank could wait for more clarity before acting further. Investors are now watching remarks from Fed Chair Kevin Warsh at the IMF-World Bank annual meetings in Bangkok on Friday.
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